Agreed, asking what stock to buy is marginally better than asking someone else to select you a wife. To continue that, you can have your buddy introduce you to a nice lady, but you had better handle the introduction, exploration of past histories, test driving etc, yourself. Likewise, you don't break out the diamond on the first date, don't drop all of your money on the one great stock you just found ("She's a nice girl.....). Furthermore(I'm having way too much fun with this
), a popular stock much like a popular lady may have recieved to much attention from others to give you much future performance once you get in. And finally with both there is the bad break-up when reality sets in.
I will freely admit I have no formal education in finance. I have about $4700 in play money right now in stocks. I have quite the chunk of real estate equity and TSP for safer investments. I find stocks in many ways, mostly reading financial news. I start to get interested when a large American company takes it in the shorts on quarterly earnings. Or a large company gets sued. Basically I am a vulture, looking to pick up stocks others don't want, yet that they will want in the future. Any time I get interested in a stock I write it down, what got me interested, and I watch it for awhile, even if I don't have money to buy. Stock watching helps confirm my decision making process, I am getting pretty mad at myself, all the stocks I should have bought 2 years ago are raging now. That helps me have confidence in me. So, back to relationships, know thyself. How you like to buy, your goals, fears, tolerance for risk and worry. I read something the other day that says most investors fear loss twice as much as they get pleasure from gain, so a 20% loss will influence their stock decision making way more than a 20% gain. So, they hold losers, and sell winners. Decide your loss limit before you buy. Evaluate a loser, is it time to sell, or is it temporary and time to buy more?
Example, I have bought Intel for a few years, right now my average cost is about $25 a share. Trading at $20 right now. I think it is going to go pretty strong this fall, so I am holding, wish I could buy more.
I recently did some remodeling to the portfolio,
Bought GNA yesterday at $10, solid bet based on earnings and sales, a young public trading history, I am somewhat speculating on the next earnings report, but if it drops I'll buy more.
Freeing up cash to buy TLM, I think it is going to tear thing up the next few months. Oil that doesn't come from the sandbox, what is not to like? A departure for me, the stock is not out of favor right now, but with favorable analyst recommendations aplenty, oil stocks doing well, oil not getting any cheaper, an earnings report in two weeks and a 3 for 1 split in a month I think the time is now.
I sit on a small position of Sherwin williams, SHW. I impulse bought $500 of it the day a lawsuit went against them, I was up 20% in a week and remain there once people saw how dumb the lawsuit was and punitive damages were denied. (I have bought and sold Merck recently too, and may buy again. I love lawsuits). The more I look at SHW's historical performance I want to buy more. Solid, unexciting company, they make money, and paint on the side apparently.
Another good bad news move was Du-pont, DD, I bought some when it was depressed by Katrina based worries, A great stock for buy and hold, I will probably buy back in the near future.
Did similar in and outs on LXK and NOC, based on bad news, got some good money and in NOC's case dividends along the way, got out.
Those make up for some bad moves, such as holding Home Depot in 2003 at $21 a share and cashing out at $25 because I had to pay bills. Don't do that, have extra money for stocks, extra savings for when the car breaks. HD now trading $39-40. Looking at the 5 year chart, damn did I ever buy at the right time, Jan 2003 to be exact. Doh!
Most of my bad stuff has been that, selling too soon because I needed money in the real world. That is like having to buy baby formula with your poker chips. All in all I am up about 5% for my stock investing life, not too bad for my self taught stock market school. I am now transitioning my plan where I reinvest earnings from my quick moves(1-6 months, not day-trading) into long term picks. Preferably once again big american companies with a good DIVIDEND, in an online account that has free dividend reinvsetment. I will continue to spend some of my money on short term buy and sell, I learn a fair amount doing it and it suits me since it apparently is more legal than online poker and blackjack. Same basic principles for me on the short term deal, are the odds in your favor(solid company, likely to rebound), can I afford to lose my bet(Scared money makes no money).
What I am trying to learn now is more chart reading, I read the earnings filings now of anything i am interested in, I am also trying to start looking at Price/Book ratios and Price?Sales ratios as a gauge. Not ignoring P/E, just looking at it less. I am also trying to learn to use stock screeners to find potential buys.
So, in the end, don't date your buddy's girlfriend. Anything I may know or think I know, or like means squat to you. Any recommendation, look it over yourseld, decide what is right for you, learn from your mistakes and keep a journal. And have fun!